Mandatory disclosure and learning from external market participants: Evidence from the JOBS act |
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| Affiliation: | 1. Kenan-Flagler Business School, University of North Carolina at Chapel Hill, Campus Box 3490, McColl Building, Chapel Hill, NC 27599, USA;2. Ross School of Business, University of Michigan, 701 Tappan Avenue, Ann Arbor, MI 48109, USA;1. University of Notre Dame, USA;2. University of Oregon, USA;3. University of Texas at Austin (Emeritus), USA;4. University of Utah, USA;1. University of Kansas, 1654 Naismith Drive, Lawrence, KS, 66045, USA;2. San Diego State University, 5500 Campanile Drive, San Diego, CA, 92182-8230, USA;1. Leventhal School of Accounting, University of Southern California, USA;2. School of Accountancy, Central University of Finance and Economics, China;1. A. B. Freeman School of Business, Tulane University, New Orleans, LA 70118, USA;2. Argyros School of Business & Economics, Chapman University, Orange, CA 92866, USA;3. School of Business Administration, University of Dayton, Dayton, OH 45469, USA |
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| Abstract: | This paper examines whether mandatory disclosure affects the extent to which firms learn from external market participants. Conventional wisdom suggests that mandatory disclosure should increase the total amount of information in financial markets. However, disclosure can also reduce investors' incentives to acquire and produce information. Using the JOBS Act to identify variations in disclosure requirements, this paper finds that firms with reduced disclosure requirements attract more informed investors and learn more from financial markets than those with stricter disclosure requirements. This learning is concentrated among firms that attract sophisticated investors, particularly those with industry expertise, and weakens once firms are forced to disclose more information. Overall, the results suggest that one benefit from regulators’ recent efforts to reduce U.S. firm disclosure requirements is an increase in firm learning. |
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| Keywords: | D61 G14 G30 M41 |
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